Colorado Expands Angel Tax Credit Program

Gov John Hickenlooper recently signed legislation expanding eligibility for Colorado's Innovation Investment Tax Credit (CIITC). The program provides angel investors with an income tax credit equal to 15 percent of their investment in Colorado small businesses that are less than five years old and are involved in research and development. Originally, the program allowed investors to claim the credits for investments made during the 2010 tax year. Under the new legislation, investments made after 2010 will be eligible until the remaining funds are exhausted. In addition, the rules regarding qualified businesses have been loosened.

The CIITC program was introduced in 2009 as a pilot program administered by the Colorado Office of Economic Development. The state Economic Development Commission provided $750,000 to cover the tax credits, of which $550,000 was allocated to investors. As per the original legislation, the remaining $200,000 could not be used for additional credits. The new bill authorizes $100,000 in both FY11 and FY12 to provide the entire planned amount of tax credits.

Credits are currently available to investors making investments of at least $25,000 in qualifying businesses. These businesses must be less than five years old and be involved in research and development or in the manufacture of new technologies, products and processes. The credit equaled 15 percent of the investment, not to exceed $20,000. Under the revised standards, qualifying businesses no longer need to have at least two non administrative, full-time employees who are Colorado residents. The new legislation also clarifies that the limit on the tax credit is per business, and investors may receive a larger total credit when making multiple investments. Read the bill...